Cryptocurrencies: are you all in?

Cryptocurrencies: are you all in?

As far as we know this is the first time blockchain technology has been promoted to the mass market via TV (in the UK at least) but it is certainly a sign of things to come. A blockchain in its most basic form is the platform that brings cryptocurrencies like Bitcoin or Ether into play.

River recently undertook a research study looking at consumers with wide ranging and self-directed investment portfolios and asked them about their understanding of, and in interest in, cryptocurrencies. The results were surprising and highlight some of the issues with the market as it currently stands.

Lots of heat, not much light

Firstly, the idea of cryptocurrency is very exciting for investors. There is genuine belief that this represents a credible long-term investment option and will become an important part of their portfolios. Whilst there a lot of noise in the financial press about the massive swings in Bitcoin, there is a wider sense that cryptocurrency is establishing itself as a credible tradable commodity that has very good long-term growth potential. In a market that is always looking for new ways to invest, cryptocurrency is seen as a great growth opportunity

HODL: Not for the faint hearted

But the key factor putting off many investors at present is the volatility of market and the potential for short term loss that will take a while to recover. The message you’ll hear on all cryptocurrency forums when asked what to do with their investments is HODL – a slang term that effectively means hold on – don’t lose your nerve. Many investors jumped on to the attractive upswing in Bitcoin but are now facing a bear market for most cryptocurrencies. The idea of getting rich quick has fast become HODL – not the investment strategy many were looking for! The scariest thing for many investors is that there is no long term normative data to benchmark how long or how low currencies will fall for – it’s a new market and investors are learning as they go.

Where do I begin?

For many this is the key barrier. Most ordinary investors don’t know the difference between a blockchain and an ICO. The terminology is a new language – both in terms of finance and technology. But currency exchanges are now emerging that allow investors the opportunity to buy different cryptocurrencies as easy as regular currencies – you simply need a digital wallet and the conviction to invest. You may even have seen a Bitcoin ATM near you!

So despite the perceived complexity and the volatility, blockchains and their cryptocurrencies are generating more interest and forming a larger part of our discussions with investors than ever before. It’s an emerging, exciting market that many want to be involved in – but indecision over what currency and to some degree what wallet and what exchange is still a factor. Many however expect the market to consolidate and simplify as it becomes more established – the perception is that it won’t be long before your IFA is recommending some cryptocurrency holdings!